Suspension threat to Met chief as Home Secretary launches inquiry into Sir Ian Blair's role in awarding £3m deal to friend

Britain's most senior policeman is facing a fresh leadership crisis after being placed under formal investigation over how a close friend won more than £3m of contracts with his force.

Home Secretary Jacqui Smith will now appoint an independent investigator to scrutinise Sir Ian Blair's role into how his skiing companion Andy Miller got a series of lucrative contracts at Scotland Yard.

The announcement came after an emergency meeting of the Metropolitan Police Authority's professional standards committee.

Members discussed the issue and decided that an independent inquiry was the best way to proceed.

Sir Ian said he 'welcomed' the investigation and would give his full co-operation.

Depending on what evidence is uncovered, it is possible that the Scotland Yard chief may be suspended during the course of the inquiry.

Senior sources remarked that if the same situation arose in a provincial force, with a chief constable under investigation, they would be suspended straight away to 'preserve the integrity of the inquiry'.

It is the second time in his career that Sir Ian has been investigated over his conduct, unprecedented for a Scotland Yard Commissioner.

Last year he was cleared over wrong-doing following a police watchdog investigation into claims he put out misleading statements in the aftermath of the shooting of Jean Charles de Menezes.

This latest inquiry heaps fresh pressure on his position at an already turbulent time for the Metropolitan police which is bracing itself for the inquest in September into Mr Menezes' death.

The force is in mediation with Assistant Commissioner Tarique Ghaffur who is threatening to launch employment tribunal proceedings for race discrimination.

It is also awaiting a tribunal judgement of another senior officer Shabir Hussain alleging racism.

Even Sir Ian's most ardent supporters are now asking themselves whether he can survive until the end of his Commissionership in 2010.

Sir Ian said yesterday: "I welcome this inquiry and will of course be co-operating fully with it.

"As I have previously made clear, I consider that I was open and straightforward in informing both the Metropolitan Police and the Police Authority about my relationship with someone who was subsequently awarded a contract with the Metropolitan Police.

"I am on record as saying that I reject any suggestion that I have behaved inappropriately and that remains my position.

"It would be inappropriate for me to comment further whilst this inquiry is under way."

Yesterday, the MPA said that it had asked Miss Smith to appoint an investigator to examine the case, a standard procedure laid out in police regulations when the conduct of the Metropolitan police Commissioner is in question.

Reshard Auladin, chair of the professional standards committee, said: "This decision does not imply any finding of wrong doing by the Commissioner, but is made to ensure that all the facts are independently and thoroughly investigated."

The Home Secretary is expected to announce the appointment within days.

Though she can select a police officer, as Sir Ian is the most senior policeman in the country, she is widely anticipated to appoint a senior legal figure.

There is speculation that the individual will be a top barrister. They will head up an inquiry team of MPA members.

Impact Plus, Mr Miller's consultancy firm, has been awarded contracts worth around £3 million between 2001 and 2008.

Mr Miller also carried out work for Surrey police when Sir Ian was chief constable there between 1998 and 2000.